For decades, retirees have been guided by a simple principle for managing their retirement savings: the 4% rule. Created in 1994 by financial planner William Bengen, this rule suggests that retirees can sustain their savings for 30 years by withdrawing 4% of their retirement fund and adjusting this amount annually for inflation. Bingen’s research, which … Read more
Retirement involves leaving the workforce and living on a fixed income for an unknown period. You must make sure your nest egg lasts as long as possible to avoid running out of money.
The 4% Rule states that when you retire, you withdraw 4% your first year; each year, the amount is adjusted for inflation. However, people are now living longer, steep inflation and a bear market are calling into question if the four percent rule is still valid or if it should be re-adjusted to 2%.
The 4% rule has become the standard norm for retirement spending was established 28 years ago. It was in 1994 when financial adviser William Bengen created the 4% rule, a general guideline for how much to safely withdraw in retirement. It is reasonable to question whether the formula is still effective.